FTC1 Assessment

Consider a production possibility frontier with books and tables. A combination of 1000 books and 500 tables is on the frontier. Which of the following are true? (Select two)

Production of 700 books and 400 tables is attainable but inefficient., Production of 1000 books and 600 tables is unattainable.

Which two of the following does GDP measure? (Select 2)

Total expenditure, Total income

Fiscal policies that move the economy toward potential GDP without a change in policy are called

automatic stabilizers.

Using the data in the table below, if the price of a stapler is $8, then there is ________ of staplers and the quantity of staplers demanded ________ the quantity of staplers supplied.

a surplus; is less than

If firms' expectations about the future become pessimistic so that they think future profits will be lower, then

aggregate demand decreases and the AD curve shifts leftward.

The production possibilities frontier illustrates which of the following economic ideas?

all of the above

Production efficiency is represented by ________ a production possibilities frontier.

all points on

Which of the following is NOT directly related to human capital?

an MRI machine

Demand-pull inflation starts with

an increase in aggregate demand.

Suppose an economy experiences a permanent increase in its expected inflation rate. As a result, there is

an upward shift of the short-run Phillips curve.

The economic growth rate is measured as the

annual percentage change of real GDP.

Money is best defined as

anything accepted as a means of payment.

Full employment occurs when

cyclical unemployment is zero.

The type of unemployment that arises from a decrease in real GDP is called

cyclical unemployment.

According to the CPI basket, the largest item in the households' budgets is

housing.

A marginally attached worker i. does not have a job and has not looked for one in the last month. ii. is available and willing to work. iii. must work at least 1 hour per week.

i and ii

Which of the following is included in U.S. GDP? i. the rental value of homes owned by U.S. citizens ii. the production of Suburban SUVs by GM in its plant in Mexico iii. tickets sold by U2 for concerts held in the United States

i and iii

Sustained increases in the standard of living depend on

increases in labor productivity.

Which of the following is NOT among the primary functions of money?

indicator of supply

After calculating net domestic product at factor cost, to calculate GDP using the income approach, in part we must add

indirect taxes and depreciation.

If the economy is at full employment, then the inflation rate

is equal to the expected inflation rate.

The quantity of money demanded

is the money that people choose to hold.

Which of the following is a monetary policy goal? (Select 2)

keeping the inflation rate low, attaining maximum employment

Which of the following correctly lists the categories of factors of production?

land, labor, capital, and entrepreneurship

When the unemployment rate is greater than the natural unemployment rate, real GDP is

less than potential GDP.

Gross Domestic Product measures the

market value of the final goods and services produced in a given year within a country.

A commercial bank's main goal is to

maximize the wealth of its stockholders.

The CPI is calculated by the Bureau of Labor Statistics on a frequency of every

month.

A change in any component of aggregate demand creates a larger change in overall aggregate demand. This is the ________ effect, and it means, for example, that a(n) ________ in consumption will cause an even larger ________ in AD.

multiplier; decrease; decrease

Which of the following is a bias in the CPI? (Select 3)

new goods bias, commodity substitution bias, D) outlet bias

The relationship between the nominal interest rate, the real interest rate, and the inflation rate is that the

nominal interest rate is equal to the real interest rate plus the inflation rate.

The national debt is the amount

of debt outstanding that arises from past budget deficits.

Labor productivity is equal to the quantity of

real GDP produced by one hour of labor.

If consumers buy a large number of plug-in electric cars, the equilibrium price of electricity will ________ and the equilibrium quantity of electricity will ________.

rise; increase

Suppose that the price of flour used to produce bagels increases. Hence the equilibrium price of a bagel ________ and the equilibrium quantity ________.

rises; decreases

Which of the following is a policy tool of the Fed? (Select 2)

setting the required reserve ratios, conducting open market operations

Advances in technology and growth in human capital ________ because ________.

shift the productivity curve upward; labor and capital become more productive

If the demand for used cars decreases after the price of a new car falls, used cars and new cars are

substitute goods.

If the federal government has a budget surplus, then it is definitely the case that

tax revenues exceeds government outlays.

Inflation is known as a ________ because it ________.

tax; redistributes goods and services from households and businesses to the government

What two parts of the government determine the federal budget? (Select 2)

the President, the Congress

Hot dogs and hot dog buns are complements. If the price of a hot dog falls, then

the demand for hot dog buns will increase.

The short-run Phillips curve is a curve that shows the relationship, other things being constant, between ________ and ________.

the inflation rate; the unemployment rate

The "shoe-leather costs" of inflation are the costs from

time spent trying to spend money quickly.

If you shop for a car online and compare car prices across dealerships, money is functioning as a

unit of account.

The aggregate supply curve slopes ________ because a ________ in the price level brings a ________ in the real wage rate.

upward; rise; fall

The CPI market basket

weights the goods and services according to the budget of an average urban household.

The reference base period for the CPI has an index number of

100

Capital is a factor of production. Which TWO of the following are examples of capital?

An accounting software for a retail store, a drill press in your local machine shop

________ is most likely to contribute to an improvement in our living standard.

An increase in real GDP

Suppose that the price for flour, which is used to produce bagels, increases. In the market for cream cheese,

Demand deceases, quantity supplied decreases and price falls

The main policy making body of the Federal Reserve System is the

Federal Open Market Committee.

Conducting the nation's monetary policy is the duty of the

Federal Reserve System.

Classify the following goods as inferior or normal: [As income increases, demand for bus rides decreases. Hence, bus rides are]

Inferior Goods

What would be an example of a consumption good or service? (Select 2)

Jake buys an iPhone., Rhianna gets a haircut.

If Joe withdraws a $100 bill from his checking account and Jack deposits another $100 bill in his savings account, by how will M1 and M2 change?

M1 will decrease, but M2 will remain the same.

Match the events to the resulting changes [Change in price level]

Movement along AS curve

Classify the following goods as inferior or normal: [As income increases, demand for movie tickets increases. Hence movie tickets are ]

Normal Goods

Match statement to their type: [The only way to bring the economy out of a recession is to decrease taxes]

Normative

Match statement to their type: [Increase in interest rates decreases investments]

Positive

Because human wants are insatiable and unlimited while available resources are limited, people are said to face the problem of

Scarcity

Match the events to the resulting changes [Change in investment expenditure]

Shift of AD curve

Match the events to the resulting changes [Change in potential GDP]

Shift of AS curve

The question of "How are goods and services produced?" most closely addresses which of the following issues?

Should Ford use expensive industrial robots or inexpensive Mexican autoworkers to produce SUVs?

If the automobile workers' union successfully negotiates a wage increase for its members, how does the wage hike affect the supply of automobiles?

The supply decreases.

Milk can be used to produce cheese or butter. If the price of a pound of butter rises, what happens to the supply of cheese?

The supply of cheese decreases.

Suppose the current price of a pound of steak is $6 per pound and the equilibrium price is $9 per pound. What takes place?

There is a shortage, so the price rises and quantity demanded decreases.

Which TWO of the following help explain the increase in the U.S. labor force participation rate for women?

There was an increase in the educational level of women., Technological change in the home increased the time available for work outside the home.

Which of the following is true?

To be classified as employed, you must work at least 1 hour per week at a paid job or 15 hours or more as an unpaid worker in your family business.

Which of the following does NOT shift the aggregate demand curve?

a change in the money wage

A change in the demand for apples could result from any of the following EXCEPT

a change in the price of an apple.

Gasoline prices increase by 50 percent and other things remain the same. As a result, there is

a decrease in the quantity of gasoline demanded.

Which of the following is a final good or service?

a new replacement muffler installed by Midas Mufflers

In the figure below, the economy is at an equilibrium with real GDP of $16 trillion and a price level of 110. At this point there is

a recessionary gap.

Which of the following is a thrift institution?

a savings and loan association

Total expenditure equals total income

because firms pay out everything they receive as income to the factors of production.

In the circular flow model,

both firms and households buy or sell in different markets.

When the Fed ________ securities in an open market operation, banks' reserves ________, and therefore lending ________.

buys; increase; increases

The difference between consumption and capital goods is that

capital goods are used to produce additional goods while consumption goods are not.

Which of the following is money?

checkable deposits

In order to make a rational choice, people must

compare marginal costs and marginal benefits.

The largest share of total production in the United States is

consumption goods and services.

If the Fed engages in quantitative easing, it has likely

decreased the federal funds rate to almost zero by buying large sums of securities.

If the government reduces expenditure on goods and services by $30 billion, then aggregate demand

decreases by more than $30 billion and real GDP decreases.

Which of the following is a potential monetary policy instrument for the Fed?

federal funds rate

The opportunity cost of holding money is that you

forego interest on an alternative asset.

Which type of unemployment is a permanent and healthy phenomenon in a dynamic economy?

frictional

Which of the following shifts the aggregate supply curve rightward?

increase in potential GDP

To eliminate a recessionary gap, the government can ________ government expenditures on goods and services or ________ taxes.

increase; decrease

When the Fed buys government securities, banks' reserves ________, the quantity of money ________, and the federal funds rate ________.

increase; increases; falls

Since 1960, the labor force participation rate in the United States has

increased for women and decreased for men.

The Fed is a central bank and as such

provides banking services to banks but not individuals.

Open market operations are the

purchase or sale of government securities by the Fed.

If the AS and the AD curve intersect at a level of real GDP that exceeds potential GDP, then the appropriate monetary policy is one that ________ the federal funds rate and ________ aggregate demand.

raises; decreases

When the CPI rises ________, the inflation rate is ________.

rapidly; high

If prices have increased since the base period, then

real GDP is smaller than nominal GDP.

The aggregate supply curve shows the relationship between

the quantity of real GDP supplied and the price level.

In measuring GDP, which of the following is included?

the value of increases in business inventories

When personal computers were first produced, the price was very high. As time passed, the price of personal computers fell because

there were technological advances in the production of personal computers.

If the Fed fears inflation, then the Fed

will sell government securities in the open market.